Sunday, October 31, 2010

Demas & Rosenthal, a team of Sacramento personal injury lawyers whose URL can be found at www.injury-attorneys.com, hereby offers basic guidelines regarding consumers' use of Online Social Networks, or OSN's. As OSN's become more prevalent and are used regularly by more people, certain legal interests could be put at risk based on the information that members of OSN sites share with the public at large.

Web sites and interfaces such as Facebook, MySpace and Twitter among others have attracted millions of users and members in the United States alone. Statistics reveal that approximately one-third of all Americans between the ages of 35 and 44 are active on OSN's, 19 percent of Americans between the ages of 45 and 54 are active on these Web sites and 10 percent of Americans between the ages of 55 and 64 have information posted on OSN Web sites.

In terms of legal rights and protections, there are different policies in place for each OSN Web site, but there are certain steps that should not be taken if someone has obtained or will need the help of Sacramento personal injury lawyers for a legal matter. These warnings and suggestions include:

1. Do not allow access to an OSN profile by people you do not know. 2. Do not post pictures of yourself attempting to perform activities that you are not able to do based on a legal claim you are making or will soon make. 3. Do not discuss or post about a pending legal matter in any way. 4. Do not discuss any injuries you've suffered as a result of the negligence of someone else. 5. Do not post personal information such as your date of birth and your phone number.

The laws regarding what can be used as evidence in California personal injury lawsuits and how this evidence is obtained in regards to OSN's are not yet settled or clear. Therefore, those who share information regarding pending legal matters should be aware that doing so can harm his or her case or claim if those representing the defense obtain this information.

About Demas & Rosenthal

Demas & Rosenthal is a law firm comprised of Sacramento personal injury lawyers that has helped clients fight for their consumer rights for nearly 20 years. The firm represents clients in California personal injury lawsuits that include matters relating to traffic accidents, defective products and general negligence. Demas and Rosenthal has an "AV" rating, the highest possible national rating from Martindale-Hubbell. The "AV" rating is derived from confidential assessments by attorneys in the community as well as judges. In addition to the highest attainable legal ability ratings, Demas and Rosenthal has been given the highest marks for "adherence to professional standards of conduct, ethics, reliability and diligence.

For the original version on PRWeb visit: www.prweb.com/releases/prweb2010/10/prweb4711104.htm

O. Max Gardner runs a select boot camp for defense attorneys to pass on his strategies

Lawyers have been traveling to a remote 160-acre farm in the mountains of Western North Carolina since 2006 to drink Scotch, network, and prepare for legal combat in foreclosure and bankruptcy cases. Groups of a dozen or so arrive about nine times a year for the four-day "boot camp" where they learn how to protect their clients' assets by exploiting the mistakes of creditors. Their instructor is O. Max Gardner III, a 65-year-old bankruptcy litigator and grandson of a North Carolina governor, who was using flaws in mortgage servicing to stave off lenders years before cases involving shoddy paperwork spurred an investigation by the attorneys general of all 50 states. Gardner charges $7,775 for the program, which includes 3,000 pages of materials, lodging, food, and unlimited wine, beer, and single-malt Scotch.

"My time with Max changed the trajectory of my legal career," says Nick Wooten, a 40-year-old Alabama attorney who shifted his focus from personal injury to bankruptcy and foreclosure after attending the boot camp in 2007. "Knowledge is power, and one thing he is able to give in his boot camp is a tremendous amount of knowledge about how the other side operates," says Wooten.

Attendees, who are admitted only after a background check confirms they don't work for creditors, travel along a gravel road to reach Gardner's farm in the South Mountains. They sleep in cabins and swap stories over meals prepared by Gardner's wife, Victoria, in the family's three-story log-cabin style house on a hill overlooking a pond. Gardner spends 10 to 12 hours each day on topics such as "Max's Favorite Discovery Devices," "Strategy to Trap Opponents in their Own Mistakes," "Mortgage Servicing Litigation: How the Legal Network for Creditors Is Organized," and "The Alphabet Problem, A to D Unlawful Transfer of Mortgages and Notes." Guest speakers at his October boot camp included a forensic accountant, a North Carolina Superior Court judge, and the former general counsel for Saxon Mortgage, now owned by Morgan Stanley (MS).

The heart of Gardner's strategy is to uncover omissions and errors in mortgage securitizations, the process in which thousands of loans are bundled into bonds and sold to investors. Securitizations are plagued by lost promissory notes and missing or inconsistent tracking of changes in ownership of loans, Gardner says during a break at the October session. "One of my primary objectives is to give you enough knowledge so that you can understand more about the business structure and organization of the creditors than their own lawyers know," he tells a class.

He started the boot camp after piecing together evidence that lenders and servicers were relying on teams of workers—what defense lawyers now call "robo-signers"—to process thousands of foreclosure documents a day without the time to verify them. While Gardner and some of his 559 graduates have been winning settlements for years, it wasn't until Sept. 20, when Ally Financial (GJM) said it was halting some evictions, that foreclosure documentation became a national issue. "We had a steep hill to climb to convince the judges that the largest financial institutions in America were engaged in this kind of conduct," Gardner says.

Most foreclosures go unchallenged because homeowners rarely hire attorneys. That changed as judges began questioning whether banks were producing sufficient proof that they had standing to foreclose. Private attorneys working on behalf of homeowners are paid in different ways. Some are paid by clients, many of whom have cash even though they aren't making mortgage payments, says Margery Golant, a Boca Raton (Fla.) attorney who graduated from the boot camp in August 2009. If a bankruptcy court judge believes a mortgage company has submitted false evidence, the court can order the creditor to pay legal fees, she says.

Gardner says the graduates of his program act like a large law firm. Linda Tirelli, a consumer bankruptcy attorney in New York and Connecticut who attended the program in October 2008, says she has the confidence to go up against what Gardner calls "tall-building law firms" because the community of graduates located in 47 states functions as a unit, exchanging documents and discovering patterns of misconduct. "It's a fraternity," she says. "We don't see each other as competition. We want more attorneys to join, because the more we have the better."

Sunday, October 24, 2010

Lawyers representing delinquent homeowners have been shouting for years about documentation problems in residential mortgages. Now that their complaints have gained traction with investors, attorneys general and some state court officials, the question of consequences looms large.

Is the banks’ sloppy paperwork a matter of simple technicalities that are relatively easy to cure, as the banks contend? Or are there more far-reaching consequences for banks and the institutions that bought mortgage-backed securities during the mania?

Oddly enough, the answer to both questions may be yes.

According to real estate lawyers, most banks that have gotten into trouble because they didn’t produce proper proof of ownership in foreclosure proceedings can probably cure these deficiencies. But doing so will be costly and time-consuming, requiring banks to comb through every mortgage assignment and secure proper signatures at each step of the way — and it surely will take much longer than a few weeks, as banks have contended.

Once this has been done appropriately (not by robo-signers, mind you) the missing links in the banks’ chain of ownership can be considered complete and individual foreclosures can proceed legally.

None of this will be easy, however. And it will be especially challenging when one or more of the parties in the chain has gone bankrupt or been acquired, as is the case with so many participants in the mortgage business.

Still, addressing all of these lapses is possible, according to Joshua Stein, a real estate lawyer in New York. “If there are missing links in your chain of title, you go back to your transferor and get the documents you need,” he said in an interview last week. “If the transferor doesn’t exist any more, there are ways to deal with it, though it’s not necessarily easy or cheap. Ultimately, you can go to the judge in the foreclosure action and say: ‘I think I bought this loan but there is one thing missing. Look at the evidence — you should overlook this gap because I am the rightful owner.’ ”

Such an unwieldy process will make it more expensive for banks to overhaul their loan servicing operations to address myriad concerns from judges and regulators, but analysts say it can be done.

ON the other hand, resolving paperwork woes in the world of mortgage-backed securities may be trickier. Experts say that any parties involved in the creation, sale and oversight of the trusts holding the securities may be held responsible for any failings — and if the rules weren’t followed, investors may be able to sue the sponsors to recover their original investments.

Mind you, the market for mortgage-backed securities is huge — some $1.4 trillion of private-label residential mortgage securities were outstanding at the end of June, according to the Securities Industry and Financial Markets Association.

Certainly no one believes that all of these securities have documentation flaws. But if even a small fraction do, that would still amount to a lot of cabbage.

Big investors are already rattling the cage on the issue of inadequate loan documentation. Last week, investors in mortgage securities issued by Countrywide, including the Federal Reserve Bank of New York, sent a letter to Bank of America (which took over Countrywide in 2008) demanding that the bank buy back billions of dollars worth of mortgages that were bundled into the securities. The investors contend that the bank did not sufficiently vet documents relating to loans in these pools.

The letter stated, for example, that Bank of America failed to demand that entities selling loans into the pool “cure deficiencies in mortgage records when deficient loan files and lien records are discovered.” Bank of America has rejected the investors’ argument and said that it would fight their demand to buy back loans.

Mortgage securities, like other instruments that have generated large losses for investors during the crisis, have extremely complex structures. Technically known as Real Estate Mortgage Investment Conduits, or Remics, these instruments provide investors with favorable tax treatment on the income generated by the loans.

When investors — like the New York Fed — contend that strict rules governing these structures aren’t met, they can try to force a company like Bank of America to buy them back.

Which brings us back to the sloppy paperwork that lawyers for delinquent borrowers have uncovered: some of the dubious documentation may undermine the security into which the loans were bundled.

For example, the common practice of transferring a promissory note underlying a property to a trust without identifying it, known as an assignment in blank, may run afoul of rules governing the structure of the security.

“The danger here is that the note would not be considered a qualified mortgage,” said Robert Willens, an authority on tax law, “an obligation which is principally secured by an interest in real property and which is transferred to the Remic on the start-up day.” If, within three months, substantially all the assets of the entity do not consist of qualified mortgages and permitted investments, “the entity would not constitute,” he said.

If such failures increase taxes for investors in the trusts, Mr. Willens said, the courts will have to adjudicate the inevitable conflicts that arise.

What if a loan originator failed to provide documentation substantiating that what’s known as a “true sale” actually occurred when mortgages were transferred into trusts — documentation that is supposed to be provided no longer than 90 days after a trust is closed? Well, in that situation, a true sale may not have legally happened, and that doesn’t appear to be a problem that can be smoothed over by revisiting and revamping the paperwork.

“The issue of bad assignment has many implications,” said Christopher Whalen, editor of the Institutional Risk Analyst. “It does question whether the investor is secured by collateral.”

In other words, were the loans legally transferred into the trust, and, if not, do the trusts lack collateral for investors to claim?

For example, according to a court filing last year by the Florida Bankers Association, it was routine practice among its members to destroy the original note underlying a property when it was converted to an electronic file. This was done “to avoid confusion,” the association said.

But because most securitizations state that a complete loan file must contain the original note, some trust experts wonder whether an electronic image would satisfy that requirement.

All of this suggests that while a paperwork cure may eventually exist for foreclosures, higher hurdles exist when it comes to remedying flaws in mortgage-backed securities. The only way to wrestle with the latter, some analysts say, is in a courtroom.

“The whole essence of this crisis is fraud and unless we restore the rule of law and transparency of disclosure, we are not going to fix this,” said Laurence J. Kotlikoff, an economics professor at Boston University.

Amid mounting national concern over the accuracy of court documents in foreclosure cases, the New York State court system yesterday directed lawyers for lenders to file an affirmation that they have taken reasonable steps to verify the accuracy of papers they file to support residential foreclosures.

"We feel we have an obligation to make sure the attorneys do their due diligence and come to us with credible papers because the consequences [of wrongful foreclosures] are so great," Chief Judge Jonathan Lippman said in an interview, adding that the new filing requirement is the first in the nation.

Attorneys must now certify, "under the penalties of perjury," that they have communicated with a representative of the plaintiff bank or lender and that they have personally reviewed all documents and records related to the case.

After making this review and "other diligent inquiry," they must attest that "to the best of my knowledge information and belief, the Summons and Complaint and all other documents filed in support of this action for foreclosure are complete and accurate in all relevant respects."

The court system's affirmation form notes that foreclosure filings in various courts around the nation have been subject to a variety of defects, including the failure of counsel to review documents and establish standings, bogus notarized affidavits and the "robosignature" of piles of documents by parties and their counsel.

"The wrongful filing and prosecution of foreclosure proceedings which are discovered to suffer from these defects may be cause for disciplinary and other sanctions upon participating counsel," the court system warns.

"I think this makes clear to everybody the court system's absolute commitment that we are not going to allow anything to interfere with the integrity of the court process," said Judge Lippman.

Attorneys general in all 50 states and the District of Columbia are jointly investigating whether mortgage companies have violated state laws. In Maryland, an emergency measure approved this week by the state's highest court outlines how state judges can review foreclosures and stop them if documents are invalid.

In New York, attorneys already have an obligation to ensure that the documents they present to the court are valid. For example, Rule 3.3 of the Rules of Professional Conduct states that lawyers should not knowingly "make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the lawyer."

However, Judge Lippman told the Associated Press that forcing lawyers to sign something to certify that all papers have gotten a proper review will hold them accountable like never before.

"We want to make sure that everyone is focusing like a laser on these particular types of proceedings," he said. "It puts them on notice. That's what this is all about. We all have to make doubly sure that we are doing what we should be doing in the first place."

Some New York judges have complained loudly about rampant errors of varying severity in legal filings by banks seeking to foreclose on record numbers of homeowners (NYLJ, Oct. 14).

Brooklyn Supreme Court Justice Arthur M. Schack, one of the judges who have pressed lenders to submit accurate paperwork, said the new Lippman rules are a "great idea," which he hopes will allow defendants and judges to "get to the bottom of this mess."

He said some lawyers appearing before him have admitted to signing documents at a rate of "hundreds a week and thousands a month, and the notary wasn't even in the room." The new rule may reduce inaccuracies, he said.

"I don't know if it is unfair," Justice Schack said. "You want to use the court system for relief, you have the burden of trying to have accurate paperwork and, based on your diligent inquiry, that it is true."

Chief Administrative Judge Ann Pfau said she had judges with cases in which they refused to sign foreclosure orders without more documentation.

"There are particular issues in the foreclosure process that require us to be particularly diligent," she said.

Judge Lippman said in a press release that "we cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process."

The New York State Bar Association welcomed the new requirement. Its president, Stephen P. Younger, said in a statement that "the chief judge has taken swift steps to address a nationwide problem in foreclosure actions. The New York State Bar Association applauds any effort to preserve and maintain the integrity of the foreclosure process."

Mr. Younger said the affirmation form would be printed on the state bar's Web site at www.nysba.org/foreclosureaffirmation.

Robbie L. Vaughn of Vaughn & Weber in Mineola, who represents homeowners in foreclosure matters, said that "anything that would help the veracity of the paperwork would help. We find so many problems, it's a shame."

Gale D. Berg is a solo practitioner who is also the director of Pro Bono Attorney Activities for the Nassau County Bar Association, which runs a monthly foreclosure clinic. Speaking personally, she said the new requirement could prove difficult for some attorneys hired by the banks. Such counsel sometimes are hired on a per diem basis and first learn of the specific cases they are to handle only on the day they are to appear.

Anthony A. Capetola, a Williston Park-based attorney, has been court referee in Nassau and Suffolk County foreclosure matters for about 35 years. He noted that many homeowners facing foreclosure cannot afford to hire a lawyer. Without someone to advocate for the homeowner, the new requirement was the court's effort to "try to put somebody's neck on the line," he said.

"The merits of this rule are going to be in the details," said Joshua Stein, a Manhattan commercial real estate attorney who watches the residential market. Mr. Stein said it might make sense to ask a lawyer to make reasonable efforts to assess the facts, but attorneys could not be expected to become a "guarantor" of those facts.

"Is this imposing some higher standard and if it does, what will the unintended consequences be?" said Mr. Stein, who is the chair of the education committee for the state Mortgage Bankers Association but was speaking for himself. He added that slowing down the foreclosure process was not a good idea. "It's a slow enough process already," he said.

Michael P. Smith, the president of the state bankers' group, said his members have long worked with court administrators to bring a "fair and timely resolution to foreclosure proceedings."

"While we have not yet analyzed the new rules, we reaffirm our support for efforts to provide further clarity to a process which already is subject to stringent state laws," Mr. Smith said in a statement.

New York is one of 23 states that requires judicial approval of foreclosures. JPMorgan Chase has estimated that its average foreclosure takes 792 days, one of the longest rates in the nation.

JPMorgan was one of a few major banks that froze all foreclosures nationwide while they reviewed their filings for problems. Two of the biggest, Bank of America and GMAC Mortgage, resumed proceedings this week.

The rule requiring a signed affirmation applies to both new cases and the 78,000 foreclosure actions already under way in New York courts. (See Foreclosure Figures for New York State: 2010 Year-to-Date Foreclosures Filed and Pending by County, 2009 Foreclosures Filed and Pending by County and Number of Filings by County 2005-2009.)

Lawyers handling pending foreclosure actions will probably need to go back to their clients and verify that all proper steps were followed, Judge Lippman said. The form created by the court requires the lawyers to give the name of the bank employee who affirmed that the records were accurate and the date the conversation took place.

Because the process is so lengthy and there are so many pending foreclosures, attorneys will be allowed to submit their affirmations at one of several points in the process.

For new cases, the affirmation would have to be included for the file to be complete. For pending cases—which can be at any point between the initial filing and the final ruling—the new affirmation is required before the judge's final signature on the decision.

Once an order is signed, the affirmation would be required before an auction sale of the property is held.

Sunday, October 17, 2010

A committee that sets rules for Maryland's courts is scheduled to meet Friday to debate whether lawyers who filed legal documents in foreclosure cases without actually having signed the papers themselves should be required to defend their work in court or risk having the cases dismissed.

At issue are hundreds of foreclosure cases in which "corrective affidavits" were filed by two attorneys who apparently allowed others to sign their names to court documents.

Improperly signed affidavits could call into question the validity of the foreclosure process as well as the integrity of deeds on homes taken back by lenders or sold at auction.

Judge Alan M. Wilner, who chairs the Maryland Court of Appeals Special Committee on Rules of Practice and Procedure, wrote Thursday in a memo to committee members that "preliminary audits have shown that hundreds of such bogus affidavits have been filed in Maryland circuit courts. The judges are alarmed at this development."

Wilner and other judges crafted a proposed rule that would allow a court to order an attorney who had filed a corrective affidavit to appear before the court to attest to the facts in the case under penalty of perjury. Borrowers and homeowners would have an opportunity to question the attorney.

Several borrowers have teamed up to file a class-action lawsuit against one of the lawyers, Jacob Geesing, and his Bethesda-based firm. Geesing and the second attorney, Hunt Valley-based Thomas P. Dore, filed corrective affidavits to remedy paperwork that was apparently signed by others in the lawyers' stead.

Montgomery County Circuit Court's administrative judge, John W. Debelius III, who helped draft the proposed rule, said in an interview Thursday that about 400 of the court's 6,000 pending foreclosure cases involved corrective affidavits filed by the two attorneys.

Debelius said he did not know yet whether other lawyers had also filed similar affidavits, but he added, "You're talking about, potentially, a problem on a very large scale."

The number of foreclosures in Montgomery County has jumped in recent years — so much so that the court's civil division is overwhelmed with cases, Debelius said, adding, "It's a monster that's taken over the courthouses."

Prince George's County has undertaken a review of 14,500 pending foreclosure cases to see whether corrective affidavits have been filed in them, The Washington Post reported Thursday.

After the rules committee meets and discusses the proposed rule, the measure goes to the Court of Appeals for consideration.

The court could accept the proposed rule or make changes before accepting it, or it could deny the rule.

District attorneys from across Massachusetts gathered at the State House yesterday to hold a press conference at which they planned to attack what they called a broken system that gives court-appointed defense lawyers more funding than prosecutors.

But some of the state’s top criminal defense attorneys crashed the event, accusing the district attorneys of misrepresenting numbers and threatening the fair trial rights of defendants.

At issue is a boost in funding over eight years for the state Committee for Public Counsel Services, which oversees the defense of indigent people.

The Massachusetts District Attorneys Association sent a letter last week to candidates for state office, complaining that last year Massachusetts spent $92 million for district attorneys to prosecute close to 300,000 cases, and $168 million to finance public defenders in two-thirds of those cases.

“The system is broken,’’ Plymouth District Attorney Timothy J. Cruz said yesterday. “The funding for defending criminals is out of control, while the district attorneys are starving for dollars.’’

But defense attorneys strongly disagreed. Representatives of the Committee for Public Counsel Services, as well as the Massachusetts Bar Association and the Massachusetts Association of Criminal Defense Lawyers, attended the event, with many defense lawyers sitting in the back of the room, arms folded, as the prosecutors talked.

The defense lawyers argued that the boost in their funding occurred because court-appointed lawyers were at the time among the worst paid in the country. They also argued that the funding has helped to establish a good defense system for indigent people, making Massachusetts one of the best states at providing constitutionally protected legal counsel.

The defense lawyers also said the prosecutors’ numbers do not reflect the millions of dollars prosecutors receive in federal grants and from drug forfeitures, as well as contributions from investigative agencies such as local and State Police, state crime laboratories, and the state medical examiner’s office.

The district attorneys raised other arguments: Even with the boost in funding, the Committee for Public Counsel Services has routinely overspent its budget: Earlier this year, the Legislature approved an additional $33 million in funding because of budget overruns, according to the district attorneys.

The district attorneys argued that the system has encouraged some attorneys and court experts to depend on income from the state. In 2008 and 2009, for instance, the Public Counsel Committee paid more than $1 million to two psychologists who testify for indigent defendants in sexually dangerous person cases, according to the prosecutors.

The prosecutors also said the average assistant district attorney handles more than 400 cases a year, while the average criminal staff attorney for the Committee for Public Counsel Services handles about 100 cases.

The prosecutors’ group called for an equal distribution of funding to both prosecutors and public defenders, saying “the state’s budget priorities and values are out of synch with the public, and it is the public that is clearly paying as a consequence.’’

Suffolk District Attorney Daniel F. Conley, in a heated exchange with defense lawyers, invited them to a symposium in November at Suffolk University to debate the arguments.

“Let’s have a civil debate . . . instead of a shouting match in these hallowed halls,’’ Conley said, while a crowd of lawyers, legal representatives, and prosecutors watched what had become a donnybrook at Nurses Hall in the State House. “We welcome a civil, a civil constructive debate on this issue. And we can do that better.’’

Even that proposal started an argument. “Why can’t we do it now?’’ Scapicchio asked.

Wednesday, October 13, 2010

When Randy Persten's mortgage was foreclosed in 2008, he looked at the paperwork and found a mystery. A company he'd never heard of — called Mortgage Electronic Registration Systems, or MERS — was bringing the foreclosure action against him.

Something didn't seem right. So he got a lawyer and fought the foreclosure, arguing that MERS couldn't foreclose because it didn't own the mortgage note he'd signed promising to pay.

Persten ultimately succeeded in getting the action dropped, only to see a new action brought by a different company that says it is the true owner of his mortgage note. Persten still isn't sure who owns his mortgage.

"Who was this MERS? Now we have no idea who owns the paperwork," says Persten, an appliance salesman in West Palm Beach, Fla. "If I won the lotto, I'd pay off my mortgage, but I don't know who to pay."

Persten's confusion is shared by other homeowners who are fighting foreclosure by challenging the legal powers of MERS, a company set up by the mortgage industry that is behind scores of foreclosures. Some homeowners are crying foul in lawsuits alleging MERS lacks the legal right to pursue foreclosures and in some cases they allege MERS has filed flawed documents to show it has the right to take a house.

The disputes over MERS are erupting into a second battleground over the mortgage industry's business practices, just as states and the federal government are opening examinations into whether mortgage servicers failed to properly verify and notarize legal papers to get court approvals of foreclosures in some states. Dozens of state attorneys general are expected to announce this week a joint investigation into alleged paperwork deficiencies, Ohio Attorney General Richard Cordray said Sunday.

The coming investigations and reviews threaten to extend the nation's foreclosure crisis, delaying the completion of many foreclosures against delinquent homeowners whether or not they win in the end. GMAC Mortgage said last week that even if "procedural mistakes" occurred, there was no disputing that borrowers had defaulted and it has the right to foreclose. JPMorgan Chase and GMAC Mortgage have suspended foreclosures in 23 states while they review their procedures, and on Friday, Bank of America widened its suspension from those 23 to all 50 states.

The MERS challenges are turning into a pitched legal battle playing out in the courts.

MERS was set up in 1997 by the country's largest banks to electronically register mortgage title transfers rather than filing them in county offices. The Reston, Va.-based company tracks more than 64 million mortgages, and 60% of all new mortgages.

MERS may not be well known to homeowners, but its name turns up on the papers that most borrowers sign at closing.

At that closing, two documents are created. One is the promissory note explaining the terms of the loan. The second is the mortgage showing there's a lien on the property and who holds it.

In the past, when a mortgage was sold, the new owner filed mortgage documents with county offices showing it now held the lien and paid recording fees.

But as the volume of refinanced mortgages grew in the late 1990s, the mortgage industry sought to reduce its fee expenses and speed up the process of re-assigning mortgage liens as mortgages were being rapidly bought and sold.

By having MERS hold mortgage liens for the owners, MERS eliminated the need for servicers to file paper documents reporting a lien holder change each time a mortgage was sold. MERS gives loans identification numbers, which are used to track changes in loans' servicers and owners.

"Without MERS the current mortgage crisis would be even worse," MERS said in a statement.

But critics, like North Carolina bankruptcy lawyer O. Max Gardner, say the MERS database isn't always up to date, leading to uncertainty about the lien holder's identity. "Sometimes MERS members enter the information, and sometimes they don't."

MERS says it has the legal right to foreclose when the owner of the loan chooses to make MERS the holder of the promissory note and gives it the right to enforce the mortgage if it goes into default. But lawyers representing homeowners disagree, saying MERS doesn't have the legal right to foreclose because it doesn't actually own the mortgage loan.

'It's a mess'

It could become a major entanglement for the housing industry. If judges rule that MERS has no legal grounds to foreclose on homeowners because it doesn't own the mortgage, homeowners could start challenging current foreclosures or past ones.

"This will be resolved legally. Will it take years? I don't know," says Guy Cecala, of Inside Mortgage Finance. "Like everything else, it's a mess."

Some state court judges have ruled that MERS can't foreclose on homeowners because it doesn't own the loans. In August, for example, an appellate court judge in Maine ruled MERS could not bring a foreclosure action because it lacked legal standing to do so. The judge found the borrower had never assigned the mortgage note to MERS and that MERS had not been harmed when the borrower didn't make payments.

MERS says that because it acts on behalf of the servicer that collects on loans, it has the authority to bring foreclosures.

MERS' position has found legal support in some states. Minnesota has a law upholding MERS' right to bring foreclosure actions. In Arizona, a state judge this year dismissed a class action by homeowners, ruling that the MERS system was not fraudulent.

MERS says the new lawsuits are baseless and that it's not true that banks that use MERS make it more difficult to find out who owns mortgages. MERS makes mortgage data more accurate and title information more reliable, it says. "The assertions involving MERS are false and utterly without merit. We will vigorously defend against these accusations and are confident that we will prevail," MERS said in a statement.

MERS' holding of mortgages isn't the only contentious issue against the company. Charges about faulty foreclosure papers that have been leveled against mortgage servicers have also been made about MERS.

In March, a Florida judge dismissed a foreclosure case after reviewing documents signed by a MERS agent. The Pasco County judge found the paperwork was fraudulently backdated in an intentional effort to mislead the court.

In Ohio, Secretary of State Jennifer Brunner is asking a federal prosecutor to look into whether officials who signed foreclosure documents on behalf of MERS were really authorized to do so.

"We're talking about people losing their homes," Brunner says. "This is serious."

New lawsuit in Kentucky

This month, homeowners in Kentucky filed a civil-racketeering class action against MERS, saying it conspired with Ally Financial's GMAC Mortgage unit, Citigroup and other banks to illegally foreclose on them. They say the banks are wrongly foreclosing on homes through MERS, which lacks titles to the houses.

"Their entire reason for existing was and still is — until they are shut down — to hide from the public record, creditors and the homeowners, the identity of the parties who could claim an interest in the mortgage loans recorded in their name," says Heather Boone McKeever, a lawyer in Lexington representing the Kentucky homeowners.

With lawsuits against MERS seeking class-action status in Arizona, California and Nevada, judges' rulings could have major ramifications for the housing industry. If they rule against MERS, foreclosures across the country could be challenged.

Fannie Mae changed its policy in May, stating that MERS must not be named as a plaintiff in any foreclosure action on a mortgage loan owned or securitized by Fannie. Its policy is that the loan's servicer should foreclose, according to MERS.

Meanwhile, homeowners who'd never heard of MERS until they were foreclosed on are raising questions.

Luis Fitzgerald, 58, of Orlando, has been fighting JPMorgan in a foreclosure since 2008. His mortgage is held by MERS. Since he was foreclosed on, he's been living in hotels. The home he had owned is vacant. He says the battle has left him with tension headaches, and he prays each night for help.

"MERS broke the old system and has fooled the courts into believing they have the right to foreclose and have the note," says Fitzgerald, who makes art for greeting cards. "It's not right."

Undocumented US residents, concerned about the crackdown on illegal immigrants, are consulting lawyers to draw up legal documents in case they are deported

According to a report by USA Today, attorneys in New Mexico, Arizona and Texas say they are being approached by illegal immigrants to create documents detailing what should happen to their families and belongings if they are deported.

"There's a culture of fear out there," said Jason Mills, a Fort Worth immigration attorney. Mills said such inquiries had only started this year since the introduction of tougher US immigration laws.

Children being stranded at school when parents were arrested at work, and wives unable to access a deported husband’s bank account, were two examples of why the legal documents were necessary.

The recent “culture of fear” has grown in the past 12 months since US immigration officials increased deportations to a record 392,000.

Creating the most concern have been recent Arizona laws, allowing police to check the immigration status of anyone they suspected of being illegal. Reports suggest more than a dozen other states are considering similar laws.

(So far we have no idea if Daud will testify or not. It is hard to say if he can be made a statewitness. We are preparing other potential state witnesses...We are focusing on a motion to discharge that policeman as an accused so he can say who were the drivers and who else were with them.)

Santos said the arrest of Daud complements other developments such as the holding of two hearings a week starting November.

She said “Tuloy-tuloy na ang hearing, masaya ang pamilya at natutuwa na tuloy-tuloy ang pagdinig sa kaso (The hearings are ongoing. The families are glad that the case is rolling.)

She also said that while the case is not going as quickly as they would have liked, at least the wheels of justice have started rolling.

“Di pa natin masabing malapit na, pero at least naumpisahan nating gumulong ang gulong ng hustisya (We cannot say we are very close to justice at this stage. But at least the wheels of justice have started rolling)," she said.

Intelligence operatives arrested Daud after midnight Saturday while he was watching an illegal motorcycle race in Pasay City. Daud denied involvement in the massacre.

At least 57 people were killed, 32 of them journalists, when armed men abducted and murdered them in Ampatuan town in Maguindanao on November 23 last year.

When asked if the victims’ families consider Daud’s arrest a good development even if his being a state witness is not yet sure, Santos said they do.

“Opo kasi marami pa silang nasa labas pa, di pa nahuli (They consider his arrest a good development because there are still so many suspects still at large)," Santos said.

The lawyer for the mass killing suspect at Fort Hood, Texas, isn't a stranger to controversy, other lawyers say.

John Galligan is the attorney for Maj. Nidal Hasan, accused of killing 13 people at Fort Hood Nov. 5 in the worst non-combat mass killing at a U.S. military installation. Galligan begins his defense of Hasan Tuesday with an Article 32 pretrial hearing to determine whether Hasan should face a court-martial and potentially the death penalty, the Austin (Texas) American-Statesman said.

The newspaper said Galligan has gotten used to abuse left on his answering machine and e-mail.

Even before the Hasan case, Galligan has a controversial figure in Bell County, Texas, the report said.

"He's not afraid -- that's for sure -- about what other people might think about him," Temple defense attorney David Fernandez told the newspaper. "Especially in Bell County, a lot of lawyers would not have taken that case."

A Belton criminal defense lawyer, Jeff Parker, said Galligan has made a habit of challenging authority.

"He likes to poke the lion with a stick," Parker told the American-Statesman. "He's fighting every battle. But if he has a flaw, it's that he thinks 15 minutes of fame can last forever."

Wednesday, October 6, 2010

Editor's note from The Legal Intelligencer: This is the first in a weekly series examining how law firms adapted during the last two years and where they are headed as the economy recovers

Last year, Eckert Seamans Cherin & Mellott CEO Timothy P. Ryan seemed well ahead of the curve when clients started pushing back on paying for the inexperience of first- and second-year associates on their matters, and law firms, in turn, started hiring fewer, if any, young attorneys.

Ryan had made the decision more than five years ago to stop hiring first-year associates and instead just recruit third- and fourth-year lawyers from other law firms once they were already trained. The economics of paying the younger attorneys $130,000 a year or more just didn't make sense to him. But true to his caveat last year, Ryan now says he is focused on hiring first-year associates in the next three years after salaries have dropped in certain markets, because even if he can't yet charge their time to clients, the firm isn't taking on as much of a cost. The other factor is that there are more talented first-years out there because the larger firms are hiring significantly fewer first-years.

In Pennsylvania, salaries have decreased at the bulk of large firms, including some of the Am Law 200 firms like Reed Smith, Drinker Biddle & Reath, Blank Rome, Pepper Hamilton, Ballard Spahr and Buchanan Ingersoll & Rooney. But firms like Duane Morris and Dechert have held tight to the $145,000 salary for new lawyers. While associate hiring may be more economical for some firms, the bulk seem to be reducing hiring.

Ryan said the coastal firms with an emphasis on financial markets have decided to maintain salaries while those at the bottom half of the Am Law 200 have largely reduced salaries.

WORKING HARDER, GETTING LESS

Surveys have shown that across the country's largest firms, associate salaries have held steady around $145,000 or $160,000 and most firms are hiring significantly fewer summer and first-year associates. Perhaps the biggest trend to come out of the promised paradigm shifts of the "Great Recession" is the concept of doing more with less.

Law firms are substantially smaller, but even as demand for legal work starts to creep up, the level of hiring isn't expected to match.

"Everywhere I go people are basically doing more with less and it's OK," Altman Weil's Tom Clay said, adding later, "Now that lawyers found out they can do just fine, I don't think you will see staffing levels return soon."

That has started to speed up, albeit not at great levels, the push for greater efficiency through the way matters are staffed and processed, he said.

In taking the old "finders, minders and grinders" analogy of law firm hierarchy, New York-based consultant Jerome Kowalski said even the finders, or business producers, who were given carte blanche to spend hours of unbilled time bringing clients in the door are expected to be billing time. The minders, who were the client relationship partners and spent a good chunk of their time making sure the clients were happy, are also now expected to bill more hours, he said.

This has created a hoarding phenomenon in which attorneys are keeping work rather than passing it down to service partners or associates, making it more and more difficult for less senior attorneys to find hours to bill, Kowalski said.

"So what we are seeing in terms of a changed model is really an inverted pyramid with the premium placed on lawyers who are well trained and know how to get stuff done and know how to get it done efficiently," he said, stating earlier, "Across the board, everyone at every level, they've never worked harder and had less to show for it."

And with clients paying less for the same work through either alternative fee arrangements or a straight rate discount, firms could potentially bring in lower profits if they don't properly staff and manage matters. Clay said firms are just now beginning to think about how to implement process management. On the whole, he said, profits are expected to hold steady this year and next, so partners won't suddenly be finding themselves below the poverty line. But one way the profits might hold is through shrinking the number of equity partners taking a piece of the pie.

A certain subset of partners are finding themselves in a precarious position. The service partner -- one without a book of business of his own who works on the matters brought in by rainmakers -- can no longer get by on just being a great lawyer.

"We're seeing partners who aren't adding the value they should being counseled out of firms," Clay said. "The service partner that doesn't bring anything else to the table, they're in jeopardy, they just are."

In some ways, law firms are going back to the old days of the "up or out" model of attorneys either making partner or being asked to leave. For years firms have used the non-equity partner tier as a dumping ground for associates not yet ready for partnership rather than a breeding ground for associates firms thought really had the potential to be a partner in the near future.

One solution is the increased use of contract or staff attorneys to handle the work the service partner or senior associate might have done. These attorneys are paid less, don't have as high of a billable hour requirement and have no expectation of making partner. Clay said firms, and attorneys, are increasingly open to the idea of using this tier.

And that is where a new caste system has developed.

THE ASSOCIATE CASTE SYSTEM

The leverage model of several associates supporting one partner has virtually disappeared, Kowalski said. In its place a three-tiered "caste system" of attorneys has developed.

An Am Law 100 law firm in 2007 may have hired 150 summer associates and given offers for full-time employment to the bulk of them. Now, those same firms are hiring fewer than 20 summer associates and the offer rates are often lower.

For that select group, the $160,000 salary is still up for grabs.

"They're the showcase pieces," Kowalski said, adding those are the well-schooled, top-of-their-class attorneys firms can tell clients they were able to hire.

"Then there's a vast underbelly of people who are being hired at these same large firms at substantially reduced" salaries, he said.

These are the staff lawyers who are not on partner track and, Kowalski said, at the high end are being paid around $90,000 and, at the low end, around $65,000. They do the same work the $160,000 associates are doing, but with less expectations from the firm, he said.

The third group of associates are the contract or temporary lawyers who work per diem on a set project with no benefits and no promise of work beyond the one project.

"I compare [them to] those guys who hang around in front of Home Depot waiting for some contractor to show up with a truck," Kowalski said.

When demand starts to pick up for legal services, the latter two groups of associates can fill in for the work traditionally done by more expensive partner-track associates, making the need for traditional associates significantly reduced for the foreseeable future.

"It's very probable that we won't be hiring the traditional lawyers that were produced from law schools," Clay said, adding that new graduates can't do much that couldn't be done through cheaper options like document review attorneys and legal process outsourcing.

"The things they used to cut their teeth on are rapidly deteriorating or going away," he said.

Clay has been advising law school deans on how to produce graduates with different competency levels.

Associate training programs, like the ones instituted by Drinker Biddle & Reath and Reed Smith, aren't likely to catch on, Clay said. Although the programs, which put first-year attorneys in training classes rather than bill their time to clients in an effort to make them more sellable, were touted as a great solution to client push back on the use of young lawyers, they haven't been replicated in many other firms. Clay said studies have shown that while associates in training programs may become more valuable more quickly, the programs decrease the profitability of the attorney "dramatically" over the course of his associate life.

The switch many firms made during the recession to competency-based advancement models rather than lockstep promotion of attorneys based on a year's more experience has a better chance of sticking, Clay said. He added, however, that only the larger firms have the staff and resources to implement such programs.

So are law firms vastly different than they once were? Changing service and leverage models are new but tougher standards for partnership entry are a return to old practices. No longer is being a good or even great attorney enough. The ones who will advance are those with business savvy and an understanding of process management, most experts say. Entering and succeeding in a law firm is getting harder.

Two plaintiffs attorneys asked a federal appeals court Tuesday to rule that some of the Louisiana Supreme Court's new restrictions on lawyer advertising are unconstitutional and can't be enforced.

A three-judge panel from the 5th U.S. Circuit Court of Appeals didn't immediately rule after hearing the appeal filed by attorneys Morris Bart of New Orleans and William Gee III of Lafayette.

U.S. District Judge Martin Feldman ruled last year that the state can freely regulate ads that employ client testimonials, portray a judge or jury, "promise results" for clients or use mottos that imply a lawyer's ability to "obtain results."

The state's attorney disciplinary board says the new rules, which took effect last October, are designed to protect the public from deceptive ads. Barry Ashe, a lawyer for the board, urged the 5th Circuit panel to uphold Feldman's ruling.

"Judge Feldman got it right on the facts and the law," Ashe said.

Bart and Gee, however, say the new rules set overly broad limits on commercial speech.

"In this case, it's not difficult to think of ways the state could have more narrowly tailored its rules," said attorney Greg Beck of Public Citizen Inc., a nonprofit group that joined Bart and Gee in suing and has filed similar suits in New York and Florida.

Not all of the rules adopted by the state Supreme Court survived Feldman's ruling. Feldman said a rule limiting attorneys' use of celebrity endorsements violates the First Amendment. He also struck down two rules governing lawyers' Internet ads, which he said don't account for differences between ads on the Web and those on television.

But the judge upheld several other new rules, including a rule banning mottos and trade names that imply results.

Judge Patrick Higginbotham pressed Ashe to explain what's misleading about ads that refer to a lawyer's past results for clients.

"That doesn't mean you're going to win them all," Higginbotham said.

Ashe said the rule doesn't preclude consumers from getting information about a lawyer's track record through other means, such as on the Internet.

Judge Priscilla Owen asked Ashe how it would be "inherently misleading" for an actor portraying a judge to appear in an ad without saying anything.

"It's the implication that the lawyer, the advertising lawyer, has special influence with a judge ... even if it's a fake judge," Ashe responded.

Beck noted that Feldman's ruling may conflict with a recent decision by the 2nd U.S. Circuit Court of Appeals, which struck down New York rules prohibiting portrayal of a judge in lawyer ads and limiting the use of mottos. One of the cases could be ripe for Supreme Court review if Feldman's ruling stands, Beck added.

"It would be good to get some clarification," he said.

Bart said the rule restricting references to "past results" has deprived him of one of his most effective advertising techniques.

"That resonates with clients," he said after the hearing.

Bart said he has submitted more than 100 ads for the board to review, and "all but a handful" have been rejected.

"The devil is in the enforcement," he added. "The application of the rules has been overly restrictive and burdensome."

Bart said the new rules haven't cost him any clients, but Gee believes the new requirements - including one that says written disclaimers must be as large as the largest print size in an ad - have undermined the effectiveness of his ads.

Monday, October 4, 2010

The AMA and other medical organizations say allowing attorneys to deduct expenses in certain liability cases would encourage lawyers to file more lawsuits

Lawyers don't need more ammunition to file meritless lawsuits against physicians, but that's exactly what a proposed tax deduction would give them.

The American Medical Association and 90 other medical organizations have told the government that the tax change shouldn't occur in a legal system where physicians already face too many unwarranted lawsuits.

At issue is a proposed change to federal tax policy that would let trial lawyers deduct their expenses in gross fee contingency cases on their taxes before a case concludes. The lawyer agrees to pay litigation expenses upfront for a percentage of the judgment or settlement. These types of cases are an alternative to net fee contingency contracts, where the client reimburses the lawyer for costs and gives the lawyer a portion of the award or settlement.

Existing tax rules let lawyers who pay litigation expenses upfront claim deductions on those expenses if there is no award. But the American Assn. for Justice, which represents trial lawyers, argues that costs in all contingency cases are business expenses that should be deductible.

The U.S. Treasury Dept.'s consideration of a tax revision involves a 1995 case decided by the 9th Circuit Court of Appeals in San Francisco. In Boccardo v. Commissioner of Internal Revenue, the court overturned long-standing policy and said an attorney could deduct costs in a gross fee contingency case as a business expense in the year the money was spent.

The Internal Revenue Service in 1997 told staff to allow such deductions in states the 9th Circuit covers. While attorneys in California, Nevada and a handful of other Western states enjoy the perk, trial lawyers want the deduction to apply nationwide.

On Sept. 1, the AMA and 90 other medical organizations sent a letter to U.S. Treasury Secretary Timothy F. Geithner in opposition. Two weeks later, 76 organizations representing state chambers of commerce, businesses and others sent Geithner a letter voicing their concern. The AMA co-signed that letter, too.

In addition to the government losing more than $1.5 billion over 10 years, the AMA and the other organizations say the tax deduction change would encourage lawyers to file scores of meritless lawsuits, proving costly to doctors and the health care system.

An AMA report issued in August shows just how bleak a litigious climate physicians already face: 42.2% of the 5,825 physicians surveyed had been sued. Although 65% of claims are dropped or dismissed, they come with a hefty price tag. Doctors and their insurance companies, on average, still laid out $22,163 in legal costs.

The fear of baseless lawsuits leads to other costs too, namely defensive medicine. A report published in the September Health Affairs found that liability system costs, including defensive medicine, are about $55.6 billion a year -- 2.4% of yearly health care spending.

Meritless lawsuits against physicians already are a problem, and a proposed tax break would encourage even more costly, time-consuming cases. The Treasury Dept. should not give trial lawyers any more ammunition in pursuing meritless lawsuits against physicians. It needs to deny this tax break request.

Lawyers and their love lives have made for pretty good television over the years, but the state's real-life failure to regulate sexual relationships between lawyers and their clients is becoming one of Texas' longest-running legal dramas.

For seven years, lawyers working on behalf of the Texas Supreme Court have been drafting new rules of conduct for state-licensed attorneys.

Now, with a draft of those rules finally on the table, the biggest sticking point has been the innocuously named Rule 1.13, or as it is more interestingly known, the "sex with clients" rule.

Unlike the large majority of other state bars, the State Bar of Texas' rules of conduct do not include any prohibitions against an attorney engaging in a sexual relationship with a client – a common restriction for licensed professionals from doctors to social workers to massage therapists.

Such a rule might seem simple to put on the books but, in fact, has been under discussion for decades in some legal circles.

"Right now, we have no such rule at all. It's just been kicked around and kicked around," said Tom Watkins, an attorney who has headed up the task force on disciplinary conduct for the Texas Supreme Court.

At last, a proposed rule has been written. But getting the state's lawyers to agree on it is another story altogether. Before any rules are adopted, the Supreme Court must review them, and they must be approved in a vote of the entire state bar.

A date for the vote has not yet been set, but when it is, approval of the rule is far from certain.

Some lawyers have argued against adopting a rule regulating sex between lawyers and clients, saying it could lead to frivolous malpractice charges.

Others say the lack of a rule opens the door for lawyers to manipulate vulnerable clients into unwanted sexual relationships without fear of reprisal from the bar.

While the bar's proposed rule would largely restrict sexual relationships, it wouldn't preclude them entirely.

As written, the rule states that lawyers (a) won't condition representation on having a client engage in sexual relations, (b) won't solicit sex as payment of fees and (c) won't have sex with someone the lawyer is personally representing unless the sexual relationship is consensual and began before the attorney-client relationship began. It also excepts spouses.

To the layman, that might seem like a fairly straightforward prohibition. But to legal minds on both sides of the issue, the rule is rife with shortcomings and potential abuses.

"It's like the old lawyer's joke that a good settlement of a lawsuit is where everybody is unhappy, so this must be a good rule," Watkins said.

Ginny Agnew, an Austin attorney who has long been concerned about the lack of a rule to protect clients from the sexual advances of their lawyers, isn't laughing.

Along with 11 other prominent female attorneys, she drafted a letter protesting the new rule, saying it simply isn't restrictive enough.

"The proposed rule does not prohibit sex with clients – it prohibits only some sex with some clients by some lawyers. In fact, for two-thirds of the Bar, the rule would permit sex with clients. The rule would not adequately protect clients – male or female – from predatory lawyers," the letter states.

Particularly troubling to Agnew is the loophole in the rule that she says would permit an attorney to begin and continue a sexual relationship with a client so long as the client is transferred to another attorney in the same law firm. That provides no protection at all to vulnerable clients, she said.

"When you have a situation where lawyers are the ones who hold the keys to the courthouse for many people ... that is a potential situation of abuse," Agnew said.

Meanwhile, Rich Robins, a Houston attorney, was quoted in Texas Lawyer last month stating that the new rule would lead to a slew of lawsuits from unhappy clients.

"How can a lawyer disprove potential accusations of amorous manipulations and the like unless all prior interactions are elaborately recorded through both audio and video means?" Robins asked in an e-mail to Texas Lawyer.

Efforts to reach Robins were unsuccessful, but Watkins said his concerns are common among the rule's opponents.

Agnew said that the state bar actually needs to adopt a stricter rule that would forbid any sexual relationship between lawyers and clients. It should also prohibit a lawyer from transferring a client to another lawyer in the same firm once a relationship begins, she said.

Linda Eads, a professor at Southern Methodist University's Dedman School of Law, disagreed that the rule isn't strict enough.

The rule "provides notification to the lawyers of Texas that they cannot engage in this behavior and have sex with clients," said Eads, a former chair of the state bar committee on disciplinary rules.

"The only exception is if you are already married or have a pre-existing relationship. ... We don't want people [in existing relationships] to be prevented from helping [a partner] with legal advice," she said.

Eads said the proposed rule is adequate as written, but added she would have no problem if it were amended to prohibit a lawyer who begins a relationship with a client from transferring that client within the same firm.

In many ways, the state bar's proposed rule is similar to the American Bar Association's model rule, which states that a lawyer will not engage in a sexual relationship with a client unless the relationship began before the attorney-client relationship.

Agnew said that the model rule is a good start and that it would be better to adopt it or something close to it than to let the rules be approved without including any prohibition of sex between lawyers and clients.

Despite her concerns over the strength of the proposed rule, it's important to get something in place to protect clients, she said.

"I would like it to be the strongest possible rule, but I would be deeply disappointed if once again we vote down a no-sex-with-clients rule," she said. AT A GLANCE: LAWYERS AND SEX

Attorneys working on behalf of the Texas Supreme Court and State Bar of Texas have proposed the state's first rule prohibiting lawyers from engaging in sexual relationships with clients.

THE PROPOSED RULE:

• Lawyers won't condition representation on having a client engage in sexual relations.

• Lawyers won't solicit sex as payment of fees.

• Lawyers won't have sex with someone the lawyer is personally representing unless the sexual relationship is consensual and began before the attorney-client relationship began or if the attorney and client are married.

Why it's controversial: Opponents say it could lead to frivolous lawsuits. Proponents say a stricter rule is needed to close loopholes in the proposed rule.

What's next:

The State Bar of Texas board of directors will submit a final draft of the rule to the Supreme Court on Wednesday.

The court will review the proposed rules of conduct for state-licensed attorneys and release them for a vote of the entire state bar on a date to be determined.